Estimating Armington Substitution Elasticity between Domestic and Imported Wood Products in Korea
2015
Min, K.T., Korea Rural Economic Institute, Seoul, Republic of Korea
This paper assesses the tariff reduction on imported wood products that will have impact on the demand for domestic wood products in South Korea, by estimating the Armington substitution elasticities based on the assumption that they are imperfect substitutes. Results indicate that domestic and foreign wood products are far from perfect substitutes to each other. The substitution elasticities in plywood and fiberboard appeared to be high, implying that tariff reduction may have negative effects on those industries. On the contrary, imported and domestic particleboard showed a low substitution elasticity. The decline of fiberboard industry may lead to the decline in forestry since fiberboard is produced mainly by thinned woods supplied from domestic forests. Therefore, effective countermeasures to enhance the competitiveness of wood products industry are needed to cope with the market opening.
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